Last year in its earnings call with investors, Netflix’s top man Reed Hastings had reiterated that they are very happy with the OTT platform’s India pricing and that they had no plans of lowering their rates. However, a year later, the streaming giant has now announced that it will roll out a cheaper subscription plan in India. No doubt, Netflix is stepping on the gas to speed up its declining growth with this move.
The decision comes on the heels of shares of Netflix going down 10% in extended trading on Wednesday after it released its earnings report for the second quarter. As per the results, for the first time in 8 years, Netflix lost over 100,000 subscribers in the US. It also showed that the company missed on the numbers that matter - international subscribers. The OTT giant’s international net additions were 2.8 million, which is quite significant, except that the expected additions were close to 4.8 million.
According to a report by cnbc.com, “Netflix can sustain its lofty valuation only if global subscriber growth can support increasing content spending and debt. And growth is entirely dependent on Netflix’s prospects internationally, in countries such as India and Malaysia.”
Netflix has reportedly attributed its pricing in certain countries as one of the reasons to why it has missed its mark on adding international subscribers.
Netflix has reportedly attributed its pricing in certain countries as one of the reasons to why it has missed its mark on adding international subscribers. In India, Netflix faces stiff competition from Hotstar and Amazon Prime Video. Both Hotstar and Prime Video’s subscription is lucratively priced at Rs 999 per year, while Netflix has a ‘Standard’ plan of Rs 650 per month (besides Rs 500/month on the lower and Rs 800/month on the higher side). Netflix’s new low cost plan of Rs 250 per month exclusively for mobile devices should put them back in the game.
While Delhi Crime did garner a lot of appreciation, shows like Selection Day and films like Chopsticks have fared far below expectations.
Besides the pricing, Netflix has also said that its weak slate of original content in the second quarter was also a reason for its limited growth. Amongst its Indian originals, none of the streaming platform’s new releases have generated the kind of buzz that Sacred Games had in July 2018. While Delhi Crime did garner a lot of appreciation, shows like Selection Day and films like Chopsticks have fared far below expectations. Meanwhile, both Hotstar and Prime Video have been gaining viewership and winning the perception battle amongst the Indian audience with shows like Hostages and Made In Heaven. Netflix India will now be counting on Sacred Games 2 and their prequel to Baahubali to help push their subscription base in India in the current quarter. The low-cost membership plan comes well-timed with the release of Sacred Games 2 on August 15, which should see a jump in subscribers for the company.
On Tuesday, Netflix India announced five new originals across genres. Shows include titles such as Bombay Begums, Mai, Betaal and Masaba Masaba - some of these shows are backed by Bollywood stars such as Anushka Sharma and Shah Rukh Khan, though they won’t be seen these shows. Prime Video has meanwhile roped in Akshay Kumar to star in one of its upcoming original shows which will be an action-thriller. But whether such star associations can eventually ensure quality content that creates a loyal customer base remains to be seen.
Netflix paid $100 million to stream Friends and was willing to pay up to $90 million to keep the rights for The Office.
Internationally, Netflix will soon be facing competition from newly launched streaming services from Apple, Disney, Warner Media (HBO Max) and NBC Universal. In fact, hugely popular shows like Friends and The Office are already on their way out from Netflix. NBCUniversal will be moving The Office to its own streaming service in 2021 and WarnerMedia will have exclusive streaming rights to Friends from 2020.
But there is a brighter side to this. Believe it or not, according to cnbc.com, Netflix paid $100 million to stream Friends and was willing to pay up to $90 million to keep the rights for The Office. Also, it was spending about $150 million for content from Disney. So, as per the good folks at Netflix, the loss of these shows will free up budgets for more original content.
For now, all eyes are on Netflix’s third quarter forecast, which expects a big jump in international subscribers, estimated to be around 6.2 million and India is expected to be a huge chunk of that estimated number. Netflix India will be hoping that a combination of their new low-cost plan and the release of Sacred Games 2 and Baahubali: Before the Beginning does the trick.
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